1. Sir Robert and Vice-Admiral, this is the
third of our annual exercises in which we monitor a selection
of major projects. For our first such report we looked at the
Common New Generation Frigate, which thankfully is off the radar
screen now; and last year we examined Bowman, which had some problems,
the A400M, the C-17 and BVRAAM. Today we are looking at a few
projects including the future carrier, which is at a key stage
in its development, the Joint Strike Fighter, which has recently
been selected for our carriers, ASRAAM, which appears to have
some technical problems, the Ro-Ro contract that had political
problems but now has financial and other problems, and finally,
with your assistance, we shall look at the progress of introducing
some of the reforms that were required after the Kosovo campaign.
Is there anything that you would like to say initially? Is there
anything to be taken into consideration before we start? In general,
how are things going? Are we getting smarter at procuring weapons?

(Sir Robert Walmsley) I do not think
that I should open with any complacent statement of that sort,
Chairman.

Chairman: In that case Laura Moffatt
will start with questions on the Joint Strike Fighter.

Laura Moffatt

2. Good morning, gentlemen. Can you tell the
Committee why you believe that the most promising aircraft for
our Future Carrier-Borne Aircraft will be the Joint Strike Fighter?
Why have the others been excluded at this stage?
(Sir Robert Walmsley) I would like Admiral Blackham
to respond, as I believe that the real thrust behind the question
concerns delivering real operational capability.
(Vice-Admiral Sir Jeremy Blackham) To put it simply,
it is the best solution by a distance, both in operational terms
and in financial terms. The Joint Strike Fighter is an aircraft
that is a generation laterin some cases maybe two generations
laterthan anything else that is on offer. It is very advanced
in the low observability area. It is high performance in terms
of its flying performance and it is being offered at a price that
is extremely competitive. It is, by a distance, the best answer
both operationally and financially.

3. Does that mean that any studies going on
with the alternatives have now ceased?
(Vice-Admiral Sir Jeremy Blackham) We have made a
public statement to the effect that the Joint Strike Fighter has
been selected for the role. Obviously, we have to keep our eye
on the possibilities should the Joint Strike Fighter, for whatever
reason, not deliver what we expect it to deliver.
(Sir Robert Walmsley) The answer is yes, the work
has ceased. We have spent the money and we know what the alternatives
are.

4. So we are just keeping an eye on the alternatives
in case something goes wrong with JSF, are we?
(Vice-Admiral Sir Jeremy Blackham) It is being aware
of what are the alternatives. As Sir Robert has said, we have
analysed the situation so we already know the answer to that question.

5. I have a series of questions on cost. We
know that there will be a contribution that has been agreed for
an 11-year programme of £1.3 billion, but there is an additional
£600 million to make the aircraft usable for UK forces. Could
you comment on that please?
(Sir Robert Walmsley) Yes. We are learning from experience.
Integrating weapons with an aircraft is what turns it from an
interesting aeroplane into a real capability. We have a large
inventory of UK weapons as well as UK specific communications
systems. Effectively, this is the integration costs of the whole
range of the UK weapons.

6. We need to know whether these aircraft are
going to be comparable aircraft, or at the end of the day will
they look very different?
(Sir Robert Walmsley) They will look almost exactly
the same. One of the reasons for that is that the Joint Strike
Fighter is capable of carrying its weapons internally, which is
what gives it its stealth characteristic, as opposed to current
aircraft that tend to carry weapons externally.

7. You mention the stealth characteristic, which
is something that is of interest to the Committee in terms of
what availability there will be for technologies to share that.
Will we have access to the technological developments that are
going on in the US to help us to have that same capability?
(Sir Robert Walmsley) That is quite a broad question.
We shall not have access to all the technological capabilities
going on in the United States which have led them to produce the
Joint Strike Fighter design. We shall have access to all the technologies
incorporated in the Joint Strike Fighter, which is what really
counts.

8. On the collaborative approach, in practice
how will that work? Can you talk about how you expect the programme
to be rolled out?
(Sir Robert Walmsley) It is a joint project. Of course,
we are in this for 8 per cent or within a percentage point or
two of that, so we cannot expect to be in an equal position to
that of the three US services, but we are what is called technically
a "Level 1" partner. We are the only "Level 1"
partner. That has ensured that we have total visibility of the
formulation of the requirement. That is very much the business
of Admiral Blackham. I cannot say that the requirement has hugely
changed as a result of our input, but there is no question that
the STOVL variant of the aircraft has meant that it has gained
enormously from the UK's interest in that variant. The US Marine
Corps and the UK see that as an important part of the programme.
I think we have helped to hold the total programme together. Once
the programme gets into its source selection phase in a big way,
which is now being started, we shall have total visibility as
a result of being in that joint project office; that is in relation
to the criteria of the selection of the various contractors. That
is enormously important. That means that not only do we believe
that there is a level playing field, but also we shall see that
fair play takes place on that level playing field. That means
that when eventually a source selection is made between the two
teams, we shall know whether we underwrite that selection. I am
absolutely confident that we shall because we shall have seen
every step of the way. I think it would be very unusual for us
to come to a different view from our United States' colleagues.
During the programme execution we shall continue with the joint
project office which means that we can be quite certain that those
things of particular interest to the UK, whatever they are, are
given a fair hearing and are managed properly through the execution
of the programme.

9. Will there come a point when requiring those
specific things that would suit the MoD make the unit costs too
high for us?
(Sir Robert Walmsley) No, I do not think so. One of
the key reasons that the Joint Strike Fighter will be exceptional
value for money is that so many of them will be built. You will
have seen figures like 3,000 aircraft. I have no idea whether
that will come true, but I am quite confident that there will
be well over 1,000 aircraft. There were only 620 of the Eurofighter.
We are talking about huge numbers of aircraft. The non-recurring
costs of setting up a factory and doing the development, put on
top of the price that we expect the aircraft intrinsically to
cost, means that we really believe that we shall get it for under
£40 million.

Chairman

10. How secure is the Joint Strike Fighter programme?
We all read Defense News, Jane's Defence Weekly
and The Officer, so that will tell us that politics prevails
in the United States and that their Navy and the Air Force have
some doubt and that they have alternative plans with which they
may be happier. Why we asked the question about the alternatives
is what happens if the programme falls. Are we in a position to
roll out a decent alternative? Perhaps we can ask your assessment
on how secure you think the Joint Strike Fighter programme is.
When will a key decision be made? Will it be irrevocable? If it
goes the way that we are not currently configured, how easy will
it be for us to switch from one company to another?
(Sir Robert Walmsley) I shall try to answer that.
I am glad that you asked for our assessment of it. As you originally
formulated the point, nobody knows. We can see a number of conditioning
factors. The first thing goes back to the huge number of aircraft
required. The United States Air Force in particular has a huge
population of combat aircraft that require to be replaced. There
is no cheaper or better value for money aircraft on anybody's
radar screen than the Joint Strike Fighter.

11. Or perhaps not on their radar screens?
(Sir Robert Walmsley) Exactly. Even a radar screen
capable of detecting such an aircraft. The point is that that
is the only game in town in terms of producing a cost-effective,
modern combat aircraft. If they want to replace their aircraft,
which is absolutely necessary if they are to retain an inventory
anything approaching that that they have now, they need a new
aircraft. The F-22 is hugely capable and, of course, there is
a bill to pay. I do not think that anyone contemplates replacing
hordes of F-16s with F-22s. The same situation, but probably less
acutely, pertains in the United States Navy, in the US Navy, I
have noticed a real warming towards the Joint Strike Fighter in
various statementsnot formal statementswith people
recognising that here is an aircraft that can really help them
to maintain their combat capability. Then, of course, we all know
that operational requirements are one aspect of what makes programmes
happen; political support and industry arguments have their importance
too. Political support is carefully nurtured by the prime contractors
thus ensuring that the aircraft is built

12.in every state.
(Sir Robert Walmsley) Exactly. More importantly from
my point of view is the industrial issue. As we see the design
task winding down on the F-18 E/Fan excellent aircraft
for the US Navythat is coming into service now, and as
we see the R & D costs and the R & D task winding down
on the F-22, what will the US combat aircraft industry do if it
does not get cracking on a new design? I have heard it described
by a very senior US industrial executive as, "We would be
heading for a train smash". I think there will be strong
industrial pressures. The time is right, now, and the resources
are available, and they will not want to recreate them in five
years' time if they paused now. The Services need it and so do
we. Those are the perspectives that I bring to a judgment on whether
it will go ahead. I think it is far more likely than not, although
I agree that other people have different views.

13. What about the STOVL version?
(Sir Robert Walmsley) It has not yet flown. I know
the Committee is anxious that we should be clear about when we
shall make a decision. I believe that will be probably fairly
early in the next calendar year. The STOVL variants will not complete
their flying test programme until about August of this year, if
all goes according to plan, and then the trial reports will have
to be written up and people will have to assess what has happened.
I think it would be extremely sensible of us to take full account
of those tests and trials before we make a commitment to the STOVL
variant. Will it be secure at that point? It probably will be
if it works, and we and the US Marine Corps believe that it will.

14. What would the problems be for UK industry
backing one horse? I know that they are adept at shifting and
I know this is conjecture.
(Sir Robert Walmsley) Thinking aloud in public is
a little dangerous. Having been lured into that playground by
you, Chairman, I would say that looking at the UK industry and
looking at the Rolls-"Royce position, which, as a company,
is hugely important to us, they are reasonably well-placed in
both particular teams and in both particular variants of the aircraft.
BAE Systems, because of their Marconi heritage, if I can put it
like that, were very careful as a supplier to make sure that they
were not shut out if one team that they backed did not win. They
have come to both teams and BAE Systems have reaped the benefit
of that Marconi strategy. I wholly understand why as an aircraft
integrator and manufacturer, BAE Systems found that they could
not ride both horses as it was too difficult. It was probably
at the Paris, Le Bourget air show in 1997 that they announced
that they had selected, or had been selected byI do not
know whichLockheed-Martin as their team. BAE Systems have
found themselves in a very strong position in that team. I know
that they are managing subcontractors, which in some ways is what
the industrial part of it is all about, managing hundreds and
hundreds of subcontractors. BAE people have taken the lead on
work being done in America. If Lockheed-Martin were not to winI
have no idea and I genuinely believe that no one else has either
as to who is likely to win the racethen it is clear from
our point of view that BAE Systems would need to have a role in
relation, at least, to the UK aircraft. We need to manage the
combat capability of those aircraft. The heads of agreements that
our Secretary of State signed along with Mr Cohen in January,
paved the way for the involvement of the UK industry regardless
of who wins. I do not deny that getting industrial work-share,
if Boeing should win, for BAE Systems and aircraft manufacturers
will not be straightforward, although I am pretty clear that something
will happen.

15. You said that we were a Level-"1 partner
in this matter in terms of access to sensitive technology. Would
that remain the same if BAE Systems did not win the contract to
construct the aircraft carrier? If BAE did not win the contract
and if Thales won the contract, would it mean that the United
States would have the same attitude towards disclosure of information
on aircraft? I presume that the builder would like to know what
was landing on his aircraft carrier.
(Sir Robert Walmsley) I do not think that the parameters
that need to be communicated to the ship builder will be particularly
classified. They tend to be weights and speeds. What is exotic
about the aircraft is the stealth that is built into the materials.
What is much more exotic still is the software with which the
shipbuilder need not concern himself. The "Level 1"
partnership that we have achieved on Joint Strike Fighter stems
not only from our position as a close ally of the United States,
but also from our financial contribution and from having been
in the programme for many years.

Mr Brazier

16. I have been a strong supporter of the Joint
Strike Fighter from the beginning and I still am. I have three
questions to put to you. First, playing devil's advocate for a
minute, some of the things that you have said sound remarkably
like the beginning of the F-22 programme. Last week I saw a report
in one of the papers that Bush had asked whether, even at this
very late stage, it was possible to cancel the order for 300,
or whatever they wanted. Are you absolutely confident that that
will not happen with the Joint Strike Fighter?
(Sir Robert Walmsley) "Absolutely confident"
is going too far. I have tried to indicate the perspectives that
I think will bear heavily on those making the decision. In terms
of aircraft numbers, you will remember that I said that 3,000
is the current requirement and I said that I am absolutely confident
that we would get over 1,000. That is not a brave statement; it
is actually a very pessimistic statement. Most people think that
we shall get at least 2,000.

17. You have three American services rather
than one, of course.
(Sir Robert Walmsley) Yes, we like three. It keeps
them balanced.

18. My second question, which concerns me considerably
more, is on the idea of the UK variant. We have had a string of
these unhappy projects, the worst one being the Phantom with the
Rolls-"Royce engine in it which was, by any standards, a
bloody disaster. Some of us are very concerned about what has
happened with the "Britised" Apache with all the extra
weight and the power that we cannot use and the considerable extra
bill. Are you happy that we shall not end up turning a good American
product into a much more expensive, heavily delayed Brit variant,
as we have done a number of times in the past?
(Sir Robert Walmsley) Firstly, I am very conscious
of the danger. This is not a problem to be swept under the carpet.
Secondly, I can recall the Phantom engine experience. We were
very cautious before we put the Rolls-Royce engine into the Apache.
That flew on the scheduled day on time and has delighted the pilots
who have flown it. We have learnt about engine integration and
it worked on the Apache. I do not think that the "Britised"
Apachethe phrase that I think you usedis going to
be anything other than an outstanding aircraft.

19. It is a lot more expensive, though, and
still has a lower power to weight ratio.
(Sir Robert Walmsley) I do not know that it is a lot
more expensive, but they bought 880 and we bought 67. There may
be some issues there about non-recurring costs in the UK development
across a small population. I do not think that intrinsically it
cost more. It will certainly be the best variant of the Apache,
as far as I am concerned, not least because of the defensive aids
system. Coming back to the key point, about adding things on,
I am clear that we need to integrate some UK weapons. Admiral
Blackham can talk about the operational capabilities of that.
The fact is that we have a huge inventory in that respect and
why should we not integrate those weapons on to the Joint Strike
Fighter. It does not mean changing the plane. Such things are
done with software now and the plane's weapons stations will be
configured to accept the UK capability. Taking your thinking on
board, we have been much more cautious about whether and when
it would be appropriate to commit to the integration of Meteor.
In relation to all the UK weapons that we are now committed to
integrate on the Joint Strike Fighter, those weapons specifications
are absolutely defined. In most cases the weapons exist and are
test-flying now, and we can specify all the information for the
aircraft design. That is a completely different task from trying
to integrate two things that are in simultaneous development,
as with the Meteor and Joint Strike Fighter. Whether a very long-range
weapon like the Meteor is appropriate for a stealth aircraft like
Joint Strike Fighter is a matter that is still to be fully bottomed
out. We have taken the caution on board and we are not going to
spoil the UK's Joint Strike Fighter by making it different from
the other 2,000.